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INDUSTRY INSIGHT

INDIAN LIFE INSURANCE

April 2004

Cygnus Economic & Business Research
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EXECUTIVE SUMMARY
India, with around 16% of the world population has 0.59% of the world life insurance market. India has a savings rate of 22%, but only around 5% is spent on insurance. Insurance penetration in India is very low at 3.26. Despite India’s vast population, low incomes, rural poverty, low levels of education, absence of innovative products and lack of awareness about insurance products have constrained the growth and penetration of insurance products in the past. The Indian life Insurance industry has been experiencing tremendous activity in the recent past. The opening up of the insurance market in 1999 has paved way to the entry of many foreign players. Presently there are 13 players operating in the life insurance market. However, the industry is highly concentrated in the hands of the Life Insurance Corporation of India which held 88% of the market share in the year 2002-2003. Overall the market share of private insurers’ increased from 2 % in the year 2001-02 to nearly 12.78% in the year 2003-04. The new entrants coped with the challenges of setting up operations, building up the agent force and spreading to the rural and semi-urban areas. Moreover, increasingly deregulated and liberalized environment, innovative distribution, and better use of technology are helping the new breed of private life insurers take market share away from the erstwhile public sector companies. With a large population, fast and rapid growing economy and constant improvement of its people’s living standard, the insurance industry in India has tremendous market potential. However, it is still at its preliminary stage of development now with a relatively small size. The strength and depth of the Indian insurance industry has a large gap compared to the average world level. In the current scenario product innovation, consumer awareness, distribution networks and customer service would be critical factors. The successful insurance companies would be those that anticipate market demand and evolve suitable products and services and offer good customer services.